NEW DELHI: India Inc has ratcheted up pressure on the government to drop the controversial tax avoidance rules, hoping that the new regime in the finance ministry will be more favourably inclined as it tries to improve the business environment.

"In our view, this is not the right time to introduce GAAR in the Income Tax Act. Only after the Government can assure a transparent, non-corrupt and fair tax administration, should GAAR be introduced," says the reference to the committee, a copy of which was reviewed by the ET.

The apex business chamber has suggested that GAAR be deferred to 1 April 2018, if it cannot be set aside altogether.

"In case it is not possible to do away with GAAR at this stage, then it would be appropriate to defer its implementation till such time that the economic conditions are more propitious for introducing GAAR," the industry body has said.

GAAR rules seek to deny tax benefit to any business arrangement or structure entered into primarily for the purpose of avoiding tax, sparking fears that they would be misused by tax authorities to harass tax payers.

The rules have foreign investors worried as they could apply to investments routed through Mauritius.

The finance ministry had issued draft rules clarifying GAAR provision and the safeguards, but they failed to address concerns, prompting the prime minster's office to has set up a committee to review the rules.

The committee will come out with the modified rules by the end of the month, and after second round of consultation would suggest final rules to the government by September 30.

The Parthasarathi Shome committee that has three other members has begun consultations. In its suggestion the premier industry chamber has proposed an alternative phased roll out in case the government cannot abandon the regime altogether.

"In case GAAR is to be introduced, the government may introduce it in a phased manner while setting out finite set of situations where GAAR would be made applicable," the chamber has said.

It also wants adequate safeguards to ensure that GAAR is not used as a tool for collecting additional tax but only for checking tax avoidance and evasion.